Fundamental Overview
The global market rout on Monday eventually weighed on gold. The reasons for the drop lie in the movement of real yields and liquidations due to the need of cash in extreme scenarios. In the big picture, real yields are falling, which is a good thing for gold, but in extreme cases when inflation expectations fall faster than nominal yields, real yields can rise and hurt gold.
This is something that happened in the last two recessions. An aggressive stock market selloff like we’ve seen on Monday generally triggers such dynamics. Things stabilised since then and the market is now consolidating around a support zone.
Gold Technical Analysis – Daily Timeframe
On the daily chart, we can see that gold is now trading in a tighter range between the 2360 support and the 2430 resistance. We can expect the buyers to step in around the support to position for a rally into new highs. The sellers, on the other hand, will want to see the price breaking lower to increase the bearish bets into the 2277 support next.
Gold Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price recently broke below the upward trendline and we saw a quick move lower as the sellers piled in and the buyers folded. We now have a downward trendline defining the current bearish momentum.
The buyers will want to see the price breaking higher to pile in for a rally into the 2483 high. The sellers, on the other hand, will likely keep on leaning on the trendline to position for a break below the 2360 support zone.
Gold Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that the price is testing the trendline at the moment. What happens here will likely decide where the price is going to go in the next days. A break to the upside should see a rally into new highs, while a strong rejection should lead to a drop into the 2350 level next. The red lines define the average daily range for today.
Upcoming Catalysts
This week is basically empty on the data front. The main event will be the US Jobless Claims release tomorrow. The market will also pay close attention to Fed members’ comments given the latest developments in the markets and the economic data.